Even though Stu Ervay thought he was financially prepared for it, the experience of obtaining long-term care for his wife when she was diagnosed with Alzheimer’s disease only made a tragic situation worse.
A retired university professor who lives in Kansas, Ervay had bought long-term care insurance for himself and his wife at a young enough age that the premiums were low. But when it was time to cash it in, the policy didn’t cover such things as the stair lift that she needed or home health aides. And when she finally had to be moved into a long-term care facility, he found he was responsible for the first three months out of his own pocket.
“I had to dig deep to pay for that,” he says.
Still, their insurance covered much of the rest of his wife’s four years in long-term care before she died, and Ervay considers his financial situation fortunate compared to that of people who have only Medicaid to fall back on — assuming they meet the strict income requirements. If they can’t, “I don’t know what they do, frankly.”
So exasperating was finding long-term care — an undertaking only getting tougher as prices rise and options narrow — that Ervay has drawn from his academic career to suggest a small solution: a “lifespan planning” course that would be required for everyone as early as when they’re in their 20s.
Even as it becomes more complicated, few Americans plan for the eventuality of long-term care in their retirement, don’t understand their choices and underestimate its cost.
Earlier preparation needed
“What we need to do is to prepare young people right at the outset,” says Ervay, who also wrote a book about his experience, Confronting Dementia: A Husband’s Journey as an Alzheimer’s Caregiver. “ The time to start preparing for this kind of thing is when you’re in your 20s, not when you’re in your 60s.”
That kind of planning has always been important. But it’s become imperative as prices for at-home care spiral and people remain mistrustful of nursing homes, which saw disproportionately high infection and mortality rates from COVID-19. Meanwhile, the pandemic and subsequent inflation have made it harder for Americans to set money aside for at-home care, or forced them to dip into what they’d already managed to save.
Many people underestimate the likelihood that they will ever need such care. And there remains widespread confusion about how they might pay for it if they do.
Even among those who planned ahead, like Ervay, 78 percent said they should have started planning sooner, according to a survey by the insurance and financial advising company Genworth Financial.
Only a third of middle-income boomers have a plan for long-term care, the Center for a Secure Retirement found. But nearly seven in 10 will need it, the U.S. Department of Health and Human Services reports.
This can be a massive burden, given that long-term care costs have outpaced inflation for nearly two decades. The annual national median cost of a private room in a nursing home is now up to $108,405, Genworth reports; a home health aide tops out at $61,776. That can quickly exhaust the average $426,000 that the Federal Reserve estimates Americans 65 and older had saved before the start of COVID for their entire retirement.
Since then, three-quarters of even middle-income baby boomers report not having been able to save as much as they did before the pandemic, according to a survey by the Center for a Secure Retirement. More than half say they’ve burned through some of what they’d already saved.
“Few older people have sufficient savings to cover long-term care costs, particularly if they need help for an extended period of time,” says Tricia Neuman, executive director of the Program on Medicare Policy at the Kaiser Family Foundation.
A Medicare misconception
People at all wealth and income levels underestimate how many years they’ll live and, by extension, the likelihood that they will eventually need long-term care, the Center for Retirement Research at Boston College found. More than a third can’t guess how much it would cost to stay in a nursing home or hire a home health aide. More than half think Medicare will pay for it.
In fact, Medicare pays only for skilled nursing home care, and only after a qualifying hospital stay, for a maximum of 100 (and an average of 22) days, the Department of Health and Human Services says.
“People think their spouse will take care of them, parents think their kids will take care of them, and the kids think Medicare takes care of everything,” said Roberta Parillo, 75, of Fort Myers, Florida, a Serving the Health Insurance Needs of Elders, or SHINE, volunteer at her Area Agency on Aging.
It’s Medicaid that subsidizes long-term care, but only for people with income and assets below a certain level or who first spend down their savings. This is verified through a tough “lookback” process to make sure that applicants haven’t transferred their holdings within five years of seeking coverage (or two and a half years in California) — another good reason to plan far ahead. If only one spouse applies for Medicare, the other is protected through a provision called the community spouse resource allowance and can keep a maximum of $137,400 in savings to live on.
Long-term care insurance like the kind that Ervay had is becoming an option only for a shrinking number of potential policyholders. That’s because the coverage is not cheap, typically costing from $2,000 to $5,000 a year, according to the American Association for Long-Term Care Insurance. And premiums are jumping.
The number of such policies sold is way down, from a peak of 754,000 in 2002 to 57,000 in 2018, the last period for which the figure is available, a U.S. Department of the Treasury task force found.
“The people who really value long-term care insurance are people who are not poor and who would not just default to Medicaid if they need it but who also aren’t really rich enough to put that money aside and self-insure,” says R. Tamara Konetzka, a professor of public health sciences at the University of Chicago and an expert in the health economics of long-term care. “It gives them peace of mind.”
Reliance on family, charitable services
There are a few other ways to get or pay for long-term care. Veterans’ benefits, for instance, can be used for adult day care. Nonprofits such as Volunteers of America and Catholic Charities in some areas offer services such as providing helpers for a few hours a day. So do some local civic groups and clubs. Senior centers and Area Agencies on Aging often have information about these.
But pretty much everybody else is forced to cover it themselves — $64 billion a year in long-term care costs are paid directly by consumers, according to the Congressional Research Service — or rely on family or friends or a small number of other options. These include saving more and earlier. There are also long-term care annuities that accrue money specifically for that purpose and life insurance policies that accelerate the death benefit to pay for long-term care.
But Americans in general aren’t planning in this way, and much of the responsibility for providing and paying for long-term care is falling on their children, another Genworth survey shows. Forty percent of caregivers are now adult children taking care of aging parents. This costs them not only time and stress, but more than $7,000 a year of their own money.
Two-thirds use their personal savings or retirement funds. That means they’re likely falling behind in planning for whatever long-term care they might someday need themselves.
Along with her husband, Vivian Austin of Macon, Georgia, cares for her 90-year-old mother-in-law, shopping and making meals for her and taking her to doctor and physical therapy appointments. And if her mother-in-law goes into assisted living, as they hope, “I see us helping. I see this coming out of our pocket.”
A retired nursing professor, Austin is confident that she and her husband have saved enough to prepare for their own future. But Debra Feldman, an advanced aging life care professional near Chicago and president of the board of directors of the Aging Life Care Association, says many people haven’t. “One of the things I always get worried about is when children who don’t necessarily have that huge bank account start paying for their parents’ care and then they’re not saving for themselves,” she says.
Feldman is part of a growing field of elder care resources planners, whom experts suggest that people consult as early as when they’re in their 40s, along with elder law attorneys, estate planners or financial advisers. Area Agencies on Aging also provide information about long-term care options. They can explain the rules for qualifying for Medicaid-funded long-term care and other resources that can be available, such as benefits for military veterans.
“You don’t know what’s coming down the road,” says Ervay, the retired professor. “I didn’t know my wife was going to get Alzheimer’s. You don’t know you’re going to get Parkinson’s or cancer. Life happens, but oftentimes we’re not prepared because we think we’re going to live forever.”